Citigroup Lowers Price Target On Aeropostale

Citigroup has published a research report on Aeropostale, Inc. ARO after the company showed that its product issues may be fixed through 2011. In the report, Citigroup writes "Product issues this late in the holiday season suggest a merchandise fix will be pushed into 2011. With the departure of Mindy Meads, even that timing comes into question, in our view. That coupled with a 3% to 5% increase in product costs in 1H11 with, in our view, limited ability to pass these along, will result in fairly significant margin degradation across the spring. We are forecasting an average operating margin decline of 300bps across the first half of the year. We're at $0.39 and $0.41 in each of the first two quarters, respectively, versus current consensus of $0.47 in each quarter." Citigroup maintains its Hold rating but has lowered the price target from $28 to $27. Aeropostale closed yesterday at $26.80.